The Effect of Increased Audit Disclosure on Managers' Real Operating Decisions: Evidence from Disclosing Critical Audit Matters

• 成果类型: Article
• 署名作者: Bentley, Jeremiah W.; Lambert, Tamara A.; Wang, Elaine (Ying)
• 署名单位: University of Massachusetts System; University of Massachusetts Amherst; Lehigh University
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/tar-2017-0486
• 发表日期: 2021
• 页码: 23-40
• 关键词: investor reactions; LITIGATION RISK; fees; ACCOUNTABILITY; paragraphs; strategies; judgments; bad

摘要

We investigate whether and how a critical audit matter (CAM) disclosure affects managers' real operating decisions in two contexts (issuing a loan that decreases versus increases the average risk profile of loan portfolios, or choosing to hedge versus speculate on commodity risk). We expect that a CAM disclosure increases disclosure costs and implies expanded auditor support for both types of activities, but we expect implied auditor support to be valued more highly for risk-increasing than for risk-decreasing activities. As a result, we predict that a CAM disclosure decreases managers' risk-decreasing activities (due to increased disclosure costs) more than managers' risk-increasing activities (as the implied auditor support counteracts the increased disclosure costs). We find evidence consistent with our prediction across multiple experiments. Our study sheds light on the unintended consequences of a CAM disclosure and provides insight to relevant parties as the new standard goes into effect.